Ex-JBC members weigh in on fiscal crisis
By Janet Simons
If the Colorado budget crisis could be framed in terms of a biblical allegory, perhaps it would be the story of Joseph persuading Pharaoh to store grain during seven boom years to get Egypt through seven lean years.
Except there is no Joseph in this story, so very little grain was put away, and what little there was is long gone.
“I sat during four of the best, easiest years to sit on the JBC,” said Republican Tom Blickensderfer, of Englewood, a member of the Joint Budget Committee from 1995 through 1998. “I don’t know how to work the magic in a recession, but I can tell you how to handle a budget when you’re flush.
“There were some talks about rainy day funds, but the majority opinion favored cutting taxes,” Blickensderfer said. “It was a Republican’s dream. We cut every tax we could. I think, at one point, we had upwards of 25 tax-cutting bills working their way through the Legislature, and quite a few passed.”
In the hope of eliciting words of wisdom to offer legislators who return to the Statehouse Jan. 13 to begin grappling with a $560 million shortage in the fiscal year 2009-10 budget, which ends in June, and who will have to cover a shortfall of at least $1 billion in the 2010-11 fiscal year, we spoke to seven former state legislators who had served on the Joint Budget Committee in better times.
Our panel consisted of three Democrats — Tom Plant, of Nederland; Peggy Reeves, of Fort Collins, and Penfield Tate, of Denver — and four Republicans: Mike Bird, a former Colorado Springs resident and Colorado College economics professor who now lives in Arizona; Tom Blickensderfer, of Englewood; Steve Tool, of Fort Collins, and Brad Young, of Lamar.
Oddly, considering the current leanings of the Legislature’s Republican contingent, not one of the four Republicans on our panel said he was a big fan of the Taxpayers’ Bill of Rights. In fact, Young, author of “TABOR and Direct Democracy, an Essay on the End of the Republic” (Fulcrum, 2006), has spent a good portion of his time since leaving the Legislature building a case against the measure.
Bird, co-sponsor of the Arveschoug-Bird spending limit repealed by last year’s lawmakers, says he originally viewed his bill as an effort to deflect support for the TABOR amendment movement, which was picking up steam in 1990.
“There had been various attempts, most proposed by Douglas Bruce, to put spending limits into the Constitution,” said Bird. “We thought that was wrong, that it was the responsibility of the Legislature. But it began to look inevitable after two or three or four attempts. In order to, in effect, pre-empt a constitutional amendment, we passed a bill to restrict state spending to a fixed percent of state revenues. Then, as the economy improves, state revenues follow the growth of the economy. It’s the only spending limit I know that makes sense.
“Steve Arveschoug put into the bill a specific limit that it couldn’t increase more than 6 percent a year. I went along because I wanted to get my part of it passed. It wasn’t going into the Constitution. It was just a legislative change.
“It passed, but it wasn’t enough to offset or pre-empt the next effort to pass a constitutional amendment. The Bruce amendment is much more restrictive and unbelievably complicated. I’m not even sure he (Bruce) understood it. He also put in that it absorbed any other spending or tax limitations and made them part of the constitutional restrictions, which is what we were trying to avoid.
“I prefer to do things by statute,” Bird said. “I don’t think that every little change that comes along should go into the Constitution.”
Young’s objections to TABOR follow the same line of reasoning, but go much further.
“People don’t realize that TABOR is specifically designed to shrink government,” says Young, who has done the math and determined that the economy normally is going to grow at a rate that’s 1 percent to 3 percent faster than inflation.
“That’s because productivity is normally increasing because of advances like copying machines and computers and better construction tools,” Young said.
He says he knows TABOR is deliberately designed to reduce the size of government because he spoke to Lewis K. Uhler, founder of California’s National Tax Limitation Committee, who hatched the concept.
“I asked him whether TABOR was designed to shrink government, and he said it was,” Young said.
REPRESENTATION WITHOUT TAXATION
Follow a path that demands taxes can be raised or lowered only through a majority vote, Young contends, and eventually you eliminate representative government completely — ergo the title of his book, “TABOR and Direct Democracy, an Essay on the End of the Republic.”
Young believes TABOR can be challenged on constitutional grounds because the Constitution “guarantees a Republican form of government.”
Nevertheless, Young concedes that Colorado’s current crisis wasn’t a direct result of TABOR, but was precipitated by “a drastic recession nationwide.”
That, and those tax cuts that were so popular in 1999 and 2000.
“I attended some meetings of the long-term fiscal impact hearings in 2009,” said Young. “Charlie Brown, former director of the Legislative Council, testified that if those tax rates hadn’t been cut in 1999 and 2000, there would be $700 million more coming into the General Fund annually.”
Although nearly everyone on both sides of the aisle enthusiastically embraced the tax cuts, says Young, one skeptic stands out in his mind — Denver Democrat Penfield Tate, who later served on the Joint Budget Committee and chaired the Appropriations Committee.
“When we were cutting taxes, one of the people arguing against it was Pen Tate,” he recalls. “The rate of revenue growth was in double digits. That lasted only a short time, just 1999 and 2000, and while it did, the cuts really were bipartisan. Only a small number of legislators didn’t vote for them, and Pen was one.”
Tate notes that during that debate, he and Todd Saliman — who now heads the Department of State Budget and Planning, and at the time was a fellow Democratic state representative and a member of the Joint Budget Committee — consistently argued against making permanent tax cuts because they anticipated TABOR’s ratcheting effect if revenues declined.
Young notes that in 1999 and 2000, the TABOR refund had given $900 million back to taxpayers. Then, in fiscal years 2001-02 and 2002-03, state revenues declined by 17 percent. When revenues were strong in 1998, the Legislature passed a bill allowing the Legislature to spend those revenues and use the following year’s revenues to pay the TABOR refund “like a credit card.” The state spent the revenues based on projected increases that would cover the TABOR refund from 1997 to 2001. But when revenues declined in 2002, the money to cover the TABOR refund had to come out of the General Fund. The decline continued, and the General Fund didn’t recoup the loss.
The budget was hit with a triple whammy, said Young.
“The revenue went down, the TABOR refund for the previous year was due, and, just when it was looking so bad, personal income in the state just went flat. We had to fill a hole of about $850 million in 2002.”
Revenues started to recover in 2004 and were stable until the recession hit hard in 2008. Which brings us to the current day.
WHAT’S A GOVERNMENT FOR?
Tate, now a shareholder in the Denver law offices of Greenberg Traurig, LLC, says he doesn’t envy members of this year’s legislative session.
“The budgeting process is always difficult because, at its core, it’s difficult to balance interests and priorities even when times are good,” Tate said.
“At the most difficult of times — like now — the challenge is terrific because there’s not enough money to pay for the government services that most people agree should be provided.”
Tate says there’s an inherent problem with continually shrinking taxes, budgets and government services.
He recalled a community meeting in 1999 where he discussed the TABOR refunds to a group of neighborhood residents.
“An older woman came up to me and said, ‘Keep the $25. If you don’t fix the streets, I’ll hit a pothole and the alignment and new tire and missing half a day of work will cost a lot more than $25. I’d rather you fix the road.’
“I don’t think the Republicans who are saying that all tax increases are bad are looking at the exposure citizens have when public repairs aren’t made. That can cost people a whole lot more than the taxes would,” Tate said.
“Part of the conversation has to be about the value of government. Only the government has the ability to provide for the community collectively.”
PANEL MEMBERS WEIGH IN
We asked each member of our panel what recommendations they would make to members of the 2010 session of the Colorado General Assembly, and this is what they offered.
Retired Colorado College economics professor Bird, a Republican, became a member of the Joint Budget Committee in 1989, was chairman that year, and continued as a member through 1993. He now lives in Sun Lakes, Ariz.
•Institute a temporary sales tax increase.
“We had a huge fiscal crisis when I came in. Paul Volcker had just clamped down on the money supply, which was necessary to stop double-digit inflation, and that led to double-digit unemployment. It didn’t last long, but while it did, it was a big crisis.
“Dick Lamm was the governor, and Republicans controlled both houses by significant margins. It was up to the Legislature. We either had to decimate the budget or find some source of revenue to get us through the crisis. We argued several hours each day, and, with the guidance of the leadership, we supported a temporary increase in the sales tax. I was reluctant to make my first vote for a tax increase. I was from Colorado Springs, and I knew I’d catch hell. Within less than a week of the new session, we had a sales tax increase, and that stemmed the crisis. It generated enough revenue that we didn’t have to decimate all the services — schools, prisons, parks, social services. We could keep going. It lasted for a year and half, and, by the time it expired, the crisis was past, both nationally and in the state. The state was in decent shape. We didn’t need the sales tax revenue anymore. To me, it was an example of how well a fiscally responsible government can work.”
Cherry Hills attorney Blickensderfer, a Republican, served on the Joint Budget Committee from 1995 through 2000. His resumé includes a 1989-1991 stint as staff attorney for the Mountain States Legal Foundation and service as director of the Endangered Species Program for the Colorado Department of Natural Resources under Gov. Bill Owens.
• The Joint Budget Committee and the Appropriations Committee have to be absolutely rigid on spending.
“They need to look at every cash fund and carry the General Fund on the backs of the cash funds. Cash funds are the funds that come from fees charged directly to citizens. The legislators need to take all or part of any balance and direct it to the General Fund. The programs that get raided will just have to go fallow for a year. I had some funds raided at the Department of Natural Resources, and we just had to suck it up. Defer programs for a year, maybe two. Don’t raise fees, especially motor vehicle fees. People are furious, and if the Legislature raises another fee, the taxpayers are going to cut their faces off. The legislators need to know that a sword is hanging over their heads.”
Nederland resident Plant, a Democrat, currently serves as director of the Governor’s Energy Office. His resumé includes experience as a geologist, research analyst, computer specialist, rafting guide and owner of Nederland’s popular Acoustic Coffeehouse. He was a member of the Joint Budget Committee from 2002 to 2006, serving as vice chair in 2005 and as chair in 2006.
•Keep making “surgical cuts” in the budget.
“What I think has been very productive about Governor Ritter’s approach is how they’re cutting the budget in a very surgical way. When the state government first tried to make cuts under Bill Owens, they made them across the board. That doesn’t show real concern about the impact each cut has on real people in the state.
“To its credit, I don’t think across-the-board cuts were ever considered by the Ritter administration. What the governor and state Budget and Planning Department Head Todd Saliman have done is look hard at all the impacts to minimize the impact on the most at-risk people. It’s really hard to do, and there’s no way to do it easily. It’s real easy to do from the outside, until you look at the impacts of the cuts, and that’s where the rubber meets the road. You can’t boil down the budget to a sound bite. Every cut has myriad impacts. The governor has done an amazing job of making that many cuts without too much impact on the state. So far, the effort to prioritize cuts so they have the least amount of impact has been tremendous. It’s hard to take a little off the top when you’ve already cut to the bone.”
Democrat Peggy Reeves, of Fort Collins, joined the Joint Budget Committee in 2001, served as its chairman that year, and continued her service through 2004. Former real estate broker Reeves spends much of her time these days serving on the boards of nonprofit organizations. She’s currently chair of the Poudre River Library Trust Board and the Medical Center of the Rockies Foundation and president of the Fort Collins branch of the American Association of University Women, among many other community commitments.
•Make cuts. Take it to the voters.
“Options for the Legislature under TABOR are almost nonexistent. The recovery is going to be slow, and people need to be sympathetic to the Joint Budget Committee.
“I think the main option for the short term is to keep making cuts. For the longer term, the legislators should come up with a bipartisan ballot issue that would give the Legislature more leeway, more flexibility in dealing with the current budget. They need to change Amendment 23 so the state can provide for K-12 education without strangling the rest of the budget, and maybe create a clear way for the state to fund our transportation needs — roads, bridges, mass transit. It’s a very tough issue.
“There’s really not much the Legislature can do right now. Their hands are tied. There are no reserves. A rainy day fund would have been great, but with this recession, even that would have been decimated. We’re looking at a whole lot of people in need. I’m getting a lot of letters from charities asking for more donations, and our charitable organizations just can’t do it all.
“I’d like to be more upbeat, but it’s a very, very serious situation. The cuts we’re doing now are very serious for families who need basic help.
“As long as people think that everything’s fine, nothing will change. People are told that the government just has to tighten its belt and get rid of waste, fraud and abuse. I think our state government is very cleanly run, and has been under both the Democrats and the Republicans. We need to understand the issues that face all of us. Government is there to provide services for everyone. We’re all part of the same government. The government is us.
“We’ve got smart legislators, but they’ve just drawn a very tough assignment.”
Denver Democrat Tate served on the Joint Budget Committee in 2001 and 2002. An attorney specializing in public finance and municipal law, he has served as administrative assistant to Mayor Federico Peña, on the Colorado Banking Board and on the Board of the Colorado Housing and Finance Authority, as a member of the Denver Water Board and as co-chair of the Denver Police Reform Commission. Tate is currently a shareholder in Greenberg Traurig, heading the municipal law and public finance practice of the international law firm’s Denver office.
•Take it to the voters.
“All of our constitutional amendments have affected our ability to respond to our needs. TABOR, Gallagher and Amendment 23 combine when you have these shortfalls, and you lose flexibility. You can’t move money around. The constraints force you to increase funding in some areas — such as Amendment 23, which forces growth of the K-12 budget — so it isn’t there to pay for increased costs of Medicaid, which the state also is forced to pay, and which go up in tough times, when more people have to depend on it.
“I think you have to modify all of them so there’s enough flexibility to move money based on policy.
“It’s also possible to raise taxes under TABOR. It requires a popular vote.
“These are troubled times, and no one wants taxes to increase. But maybe this is the time to ask.”
Fort Collins resident Tool, a Republican, served as chair and vice chair of the Joint Budget Committee in 1999 and 2000. A former real estate agent, he served as senior director of the Department of Motor Vehicles and as executive director of the Department of Health Care Policy and Financing under Gov. Bill Owens. These days, he’s “mostly retired,” but does “a little consulting work for the government.”
•Institute zero-based budgeting. Take it to the voters.
“If I could wave a magic wand, I would have the state return to zero-based budgeting. It’s already in the statute, and from an administrative and legislative standpoint, it’s time to do it. It’s not going to create significant savings, but it will help streamline state government and generate some efficiencies.
“Zero-based budgeting forces the state to really look at all the programs within departments, so we find the ones that aren’t truly necessary and can be legitimately cut. Suicide prevention, for example, is a good program, and it’s money well-spent. I supported it in the Legislature. But in a down economy, it may not make sense to keep it going.
“For example, I was executive director of the Department of Health Care Policy and Financing under (Gov. Bill) Owens, and if I’d had longer to work on it, I would have tried to move every Medicaid program under that department, which already handles 95 percent or more of the Medicaid programs. The Department of Health and the Department of Human Services also get Medicaid funds, and I believe it would be more efficient for all of it to go through the same agency.
“Most of the difficult choices have been made. Medicaid is a federally mandated program and can’t be changed very much. Higher education, corrections and K-12 all have taken some huge hits. So let’s streamline the departments some, too.
“I think the longer we’re in the fix we’re in, the more likely it becomes that we’re going to have to go to the people for a change in TABOR. We talked about it 15 years ago, and we might be getting to that point. Most moderates in both parties agree that the ratcheting-down effect of TABOR is one of our biggest problems.
“We need to trust the citizens more, and when government needs revenue, we shouldn’t be afraid to ask for it. Have the guts to use TABOR to raise taxes by taking those needs to the people.
“We also need to focus on job creation. That’s the answer to everything. Fix that, and everything else takes care of itself.”
Lamar Republican Young served on the JBC from 2001 through 2004. His résumé includes stints as an agricultural engineer, math and science teacher and computer programmer and systems analyst. He currently works as a lobbyist for RX Plus Pharmacies, a Lakewood-based trade association supporting independent pharmacies, and is a senior fellow at the University of Denver Center for Public Policy and Contemporary Issues.
•Cut programs. Take it to the voters.
“We’ve got to do something about TABOR. Right now the revenues are down, and the Legislature can’t raise taxes without a vote of the people. That was tried last year, to increase oil and gas severance taxes and use it on higher ed. And that failed.
“We can’t solve this just by cutting programs and we can’t solve it just by increasing taxes. We’re going to have to do both.”